Britain’s vote to leave the EU is already casting a shadow over international growth, the International Monetary Fund chief said in an interview, adding that the imposition of new trade barriers in another large economy could have ruinous effects.

“I think it would be quite disastrous, actually. Well I don’t think I should say disastrous because that is an excessive word and I should refrain from excessive words. But it would certainly have a negative impact on global growth,” she told the Financial Times.

[Mish Comment: So is it quite disastrous or simply negative? Her meaning is uncertain]

Any uncertainty surrounding a Trump presidency would probably yield more instability in financial markets, similar to the upheaval in the wake of last month’s UK referendum, she said in response to a question. But the IMF chief took care to avoid singling out any politician or referring to Mr Trump by name.

[Mish comment: Lagarde took care to avoid singling out Trump, while singling out Trump]

Ms Lagarde said “waves of protectionism” in the past had “preceded many wars” and that protectionism “hurts growth, hurts inclusion and hurts people”.

Ms Lagarde said she did not want to get involved in the political debate in the US, the IMF’s biggest shareholder. But she made clear her dim view of the policies of Mr Trump, who has proposed punitive tariffs on goods from China and Mexico and ripping up US trade pacts such as the North American Free Trade Agreement.

[Mish comment: Lagarde does not want to get into the political debate in the US, but hands Hillary campaign talking points on a silver platter]

The IMF’s assessment of the impact of the Brexit vote on the UK economy depends heavily on what sort of trade relationship with the EU a new government would be able to negotiate, she said.

Should a deal preserve access to the single market — such as Norway now enjoys — then the UK economy would be only 1.5 per cent smaller by 2019 than would be the case if Britain remained part of the EU. Were a deal to lead to the UK’s access to the EU’s 27 other economies being subject to tariffs under World Trade Organisation rules, it would cost the UK 4.5 per cent growth.

The IMF had not modelled the economic impact of a scenario in which the UK’s exit from the EU drags on and uncertainty continues for a year or more, Ms Lagarde said, but the political crisis set off by the vote could make such events likely.

[Mish comment: The IMF warned of a prolonged period of uncertainty but did not model the result even though the “political crisis set off by the vote could make such events likely”. How likely? The following paragraph provides the answer]

“Do we have a forecast and scenario with prolonged uncertainty, total lack of clarity, no triggering of Article 50 [the official notification required to leave the EU], things staying in limbo for a long period of time? No. We don’t have that. We doubt that it would be sustainable politically, geopolitically,” she said.

[Mish comment: Prolonged uncertainty is both likely and unlikely]

For the July 19 update of the IMF’s World Economic Outlook, Ms Lagarde said the organisation was looking at presenting a variety of possible scenarios for the global economy depending on the outcome of Brexit discussions — a departure from its usual format.

[Mish comment: I can hardly wait. Until then, the uncertainty is nearly killing me]

Waves of Protectionism

If Lagarde wanted to make a positive contribution she should have embraced free trade, totally and completely.

She is correct on one thing. And it’s a very big thing: “Waves of protectionism in the past had preceded many wars. Protectionism hurts growth, hurts inclusion and hurts people“.

The solution is so simple it’s beyond Lagarde’s comprehension.

The EU, US, and Asia ought to work out a genuine free trade agreement not a mind-numbing set of rules and regulations that encompass the EU, nor secret agreements like Obama’s proposed Trans Pacific Partnership (TPP) that has little to do with free trade.

A genuine free trade agreement would consist of a single statement: “Effective immediately, all tariffs and subsidies, on all goods and services, are removed.”